Lawmakers debate rent control

Bill seeks to clarify rent control laws for affordable housing

Peter Marcus, DDN Staff Writer

Wednesday, February 24, 2010

A bill making its way through the legislature perceived by some as being about rent control is being criticized by property owners as an assault on property rights.

House Bill 1017, sponsored by Rep. Daniel Kagan, D-Englewood, seeks to modify a decades-old prohibition on rent control so that municipalities and counties are able to negotiate and enter into agreements with developers, requiring them to develop based on the wishes of local government.

The House Local Government committee backed the bill yesterday on a 6-5 Democrat party-line vote.

Questions have been raised in the past few years over whether local government is permitted to require developers to set aside units for people in need, such as the homeless, or battered women. The same questions have been raised over requiring percentages of affordable housing as a condition for approving development.

A case brought by California-based developer Arnold Meyerstein, who owns the Ute City Place affordable housing complex in Aspen, challenged the local Housing Authority in court, arguing that the city agency’s deed restrictions Ń which mandate affordable workforce housing Ń are in effect a form of rent control, and therefore illegal under state law.

The judge hearing the case ruled in favor of Meyerstein, but the case is expected to go to a state appellate court, if not ultimately to the Colorado Supreme Court.

Kagan says Colorado is in “legal limbo,” arguing that his bill clarifies that it is not a violation of rent control laws for a local municipality or county to enter into agreements with developers requiring them to limit rent on some units when they are seeking land use approval. The bill would also clarify that deed restrictions are enforceable.

HB 1017 would only apply to new buildings, not existent buildings, and it does not affect existing landlord-tenant relationships, said Kagan.

“What this bill will do is it will enable the free market in rent to continue to operate as it has for decades; it will enable local governments and developers to contract where they see fit to do so, individually in a negotiated agreement É that there will be affordable housing within the development, and they will be able to do so confident that the agreement will not be upturned by the courts, or usurped by speculators during the course of the agreement,” said an eloquent Kagan.

Critics, however, argue that the bill puts the state on a slippery slope towards permitting statewide rent control, in which local governments would be able to control all aspects of how a developer builds their property.

“HB 1017 gives government entities and municipalities the upper hand, an unlevel playing field,” said Nancy Burke, vice president of government affairs for the Colorado Apartment Association. “This bill adversely affects private property rights because if this bill passes, rent controls will be imposed by local governments.”

Sunny Banka, spokeswoman for the Colorado Association of Realtors, echoed similar concerns.

“We are seeing more and more government entities Ń in the mountains in particular Ń imposing requirements on developers and owners to agree to rent control or affordable housing requirements as a condition of the developer getting their property approved for a particular use,” said Banka.

But 83-year-old Mary Lou Taggart, living on a fixed income, described how she was forced out of her Denver apartment when the landlord kept raising her rent each year by as much as $75. She has since moved to an affordable housing complex, which Taggart said has a long waiting list.

“I keep seeing in this bill the word ‘voluntary,’ which leads me to believe that nobody’s forcing anybody to do anything Ń that this is a voluntary arrangement between developers who may have a compassionate bone in their body for people that need low-income housing, and they can work that out with a government entity,” said Taggart.

HB 1017 now heads to the House for full debate.

Comments:
Mike Papantonakis @ 2010-02-24 14:44:17	What doesn't seem to come out of any of these published stories about this bill is that the long term, unintended consequences of such a bill can and will hurt those who need affordable housing and those who wish to provide housing. A deed restriction that makes sense today should be freely negotiated with the municipality and the developer. The problem is that this deed restriction runs with the land and in any subsequent sale of the property, the new owner will have to abide by this restriction, whether it makes sense any more or not. Times change, economies change and neighborhoods change. Placing these resitrictions in perpetuity will result in buildings producing lower and lower revenues over the years due to ever increasing expenses, therefore causing the value to drop at some point to a level that doesn't justify a purchase by one of those nasty "speculators". The deterioration of the property due to lack of cash flow will result in poor living condtions and no one will be able to do anything about it. Property taxes on that property will diminish and when you start to string enough of those properties together, the impact on the tax revenues will be devastating. Schools and other government funded agencies will suffer. Anyone interested in developing in Colorado who knows that they may be forced to provide long term deed restrictions and consequently may see their property's value decline thus making the property unsellable will choose to develop in another state. As an owner of property myself, I can say that I would always shop for the best investment for me and if a property that cannot grow in value it would not be a sound investment. I'll find one that I know has no restrictions for growth. Long term, those who need the low income housing will be living in less than desireable properties and the availability of low income property will diminish. No one wins. Various agencies within Colorado provide hundreds of millions of dollars to affordable housing each year. If more is needed, we should look at other ways to provide more without passing a seemingly harmless law that results in long term disaster. Let's be sensible about how we solve the problem of low income housing. Tax incentives to offset lower revenues will provide property owners the peace of mind that they will be able to continue operating in the black, continue investing their reserves to maintain and upgrade the property and eventually will be able to sell the property for a value that's reasonable. This bill hurts Colorado and in a time when we need to attract business and investment, our legislators have decided to pass bills that will take us in the other direction. I am more than happy to further explain this to any legislator who would like to take the time to listen and understand it.
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